A personal loan means the funds are borrowed and can virtually be used for nearly anything. It could be something as important as medical or family emergency expenses, some new high-priced toys, or perhaps that dream vacation to Cancun you always wanted.

No matter how you slice it, the point of a personal loan is to get you funds in the times you need (or want) them the most

They are normally structured as installment loans, which means that you are responsible for paying back the total amount borrowed, plus interest over a set period. of time. A bad credit personal loan is primarily the same exact thing but focused more on consumers who have low to mid-range credit scores as well as limited borrowing options. You will find that in the long run, the optimal solution is to build up your emergency savings to properly deal with unexpected financial situations, but the truth about accidents and surprises is we don’t always see them coming which means this method is not always feasible. Personal loan options for people who have bad credit can provide many individuals with financial relief in times when they need financial assistance the most.

What are the two basic types of personal loans:

Secured – Money that is secured refers to the fact that you are required to secure the amount borrowed with some variation of your assets. In this case, assets turn into collateral for the loan, and if you’re unable to make your payments on time, you forfeit the collateral.

Unsecured – Money that is unsecured is borrowed, but not secured with any assets or collateral. In this case, if you fall behind on the loan, the lender is unable to automatically swoop in and claim your property.

Sometimes there may be reasons as to why you don’t qualify for an unsecured loan, such as poor credit, but you may find that you’re approved for a secured loan since you have collateral to put up for it. An asset is defined as any item that holds economic value, such as a house, valuable collection (or collectible), or vehicle. You should always consider the fact that you may lose whatever asset you put up as collateral when agreeing to a loan on these terms. In most cases, a secured loan is far easier to qualify for since there is very little risk involved for the lender. Secured loans generally come with lower interest rates and higher borrowing limits as well.

Is Your Credit Good Enough to Qualify For a Personal Loan?

Lenders will review your credit score to get an idea of just how likely you are to repay a loan. There are various factors they’ll look at, such as payment history, credit usage, and credit history. These are all variables that will ultimately affect your score. Credit scores range from 300 to 850 and the higher someone’s score is suggests to the lender that they are more likely to comply with the loan terms and not cause any issues for the lender. Before you even think about applying for any type of loan, you’re going to want to check your credit score first. If you’re in the market for a personal loan and your credit is in the low to average range, you may find that you have limited choices available with higher interest rates. Traditional lenders such as large banks may even turn your application away because you’ll look high risk. If this happens, don’t give up hope, it just means you’re going to need to look into personal loans that are designed for those who have bad credit.

Where Can I Find a Personal Loan If I Have Bad Credit?

Having bad credit is a rather unfortunate situation to find yourself in, but in regards to getting a loan, it’s not typically the end of the world. Rest assured there is an entire industry out there dedicated to helping individuals who have bad credit. National and community banks oftentimes have some of the strictest standards on the market when it comes down to lending out funds. Credit unions, however, can be a little more user-friendly with their loan qualification process. In fact, they have special programs that are meant for consumers with low credit scores. It’s also worth pointing out that federal credit unions have more desirable loan terms because they are restricted to charging a maximum APR of 18%. Because of this, it’s always a good idea to check with your local credit union to see what options they may have available for you.

Other than credit unions, there are a ton of online lenders that will give loans to people who have less than perfect credit. Most of these lenders claim to have fast funding and flexible payment plans available for multiple different loans. Since there are a lot of options on the table, you’ll need to do your homework and figure out which one suits you the best.

What Should I Look For?

First and foremost, do your research and shop around before jumping in on a loan. There are a few factors you’ll want to consider before making such a major decision. Fortunately, there are several companies online that make the process of comparing top lenders fast, easy, and painless. So, what should I be considering when I’m looking for the loan that’s best for me?

  • APR – Annual Percentage Rate (APR) is the annual rate that you will be charged for borrowing money. This also includes interest and fees and remember, you’ll want to find the lowest APR available to you to ensure you lose the least amount of cash to interest.
  • Loan Min and Max – Lenders generally have a minimum and maximum amount of funds that you can borrow. The exact amount of how much you can borrow depends on several factors, one of which is your credit score.
  • Loan Repayment Period – This one is self-explanatory. It’s the period of time that you are given to fully repay the loan. If the term is longer, you’ll pay more in interest, which raises the total amount due.
  • Monthly Payments – The total sum of money you are responsible for paying back to the lender on a monthly basis. This is generally calculated by how much you borrowed, interest rate, and loan term.

Regardless of what you hear about the lender, it’s imperative to conduct your own research. Just because their terms worked great for Ted, your bowling buddy, doesn’t mean they’re going to be equally as great for you. Make sure that you choose a reputable lender by checking online reviews to learn as much as you can about the institution you are considering. It’s not a bad idea to plug their name into the Better Business Bureau and the Consumer Complaint Database too, which will help you to learn even more about them.

Is a Personal Loan Right For Me?

Before borrowing money, you should ask yourself the following:

  • Do the terms work for me?
  • Will it help me save money in the long term?

These answers depend on your unique situation, as well as the loan amount and terms. If you realize that you are paying high-interest rates on credit card debt, it may be a smarter play to consolidate the debt with a personal loan. In some cases, obtaining a personal loan can actually assist with improving your credit score.

If you’re not currently staring down the barrel of an emergency, you should build up your credit to a more favorable status to get more favorable loan terms. By paying your bills on time, working towards reducing your total debt, monitoring your credit score, and reducing the balance on all your accounts and credit cards to under 30% of the allowed credit limit, you can drastically repair even the most battered credit scores in the matter of a few months.

Other Ways To Find Money

If you don’t qualify for a personal loan or you just don’t think it’s the best play for you right now, there are a few other options available. You can consider:

  • Credit Card Advance
  • Home Equity Loan
  • Peer to Peer (P2P Loans
  • Retirement Loan